The Global Subscription Economy Is Here!

By Erika Malzberg • December 13, 2017

The Subscription Economy is here. And this transformation is global.

People as well as businesses in nearly every industry increasingly opt for outcomes over assets – rides over automobiles, streams over compact discs, cloud computing and storage over on-premises servers.

To be a successful subscription business requires a whole different way of thinking. Businesses need to rethink their business model and their relationship with every single customer. It’s no longer about how many products you sell, but about how many subscribers you have, and your ability to monetize these relationships over time. The dictate is to create new experiences in which everything is oriented around the subscriber.

We can see this shift to a subscription model made manifest in such proof points as this: In July 2016, the four largest public companies were all SaaS, generating revenue by subscription models: Apple ($567B), Alphabet ($564B), Microsoft ($445B), Amazon ($366B).

In fact, according to the Subscription Economy Index, subscription-based businesses are growing revenue 9x faster than that of the S&P 500. Additionally, subscription-based companies with over $100 million dollars in annual recurring revenue continue to outperform smaller companies, with 28% per year growth (that’s 40% faster than the overall SEI average), versus 14% for $20-100M and 18% for $1-20M and 18% for those under $1M in revenues.

Here are some additional global proof points of this growing global Subscription Economy:

$420B was spent on subscriptions in the U.S. in 2015; up from $215B in 2000. – Credit Suisse

58 million adults in Britain (89% of the adult population) are now subscribing to at least one product or service. That’s up 11% since 2016. – YouGov (September 2017)

80% of German companies have dealt with the issue of subscription business models. – IDG Research Services (April 2015)

76% of business leaders in Australia expect revenue gains from new delivery models of goods and services to either increase or significantly increase during the next two years. – Zuora Survey at Ad:tech Summit Sydney (May 2016)